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Enhanced capital allowances

Energy saving equipment can improve cash flow

Enhanced capital allowances

Enhanced Capital Allowances (ECAs) are a smart way for a business to improve its cash flow through accelerated tax relief. The ECA scheme for energy saving technologies encourages businesses to invest in energy-saving plant or machinery specified on the Energy Technology List (ETL). The ETL is managed by the Carbon Trust on behalf of the Government.

The ECA scheme provides businesses with 100% first year tax relief on qualifying capital expenditure. The ECA scheme is only valid for energy saving technologies which are on the ETL. The scheme allows businesses to write off the whole cost of the equipment against taxable profits in the year of purchase. This can give a cash flow boost and an incentive to invest in energy saving equipment which can be slightly more expensive than less efficient alternatives.

How the ECA scheme works

Let's say your business pays corporation tax at 28%, every £1,000 spent on qualifying equipment would reduce its tax bill in the year of purchase by £280.

In contrast, for every £1,000 spent, the generally available capital allowance for spending on plant and machinery could reduce your business' tax bill in the year of purchase by £56.

Put simply, an ECA could provide a cash flow boost to your business of £224 for every £1,000 it spends in the year of purchase.

For more information about the scheme, contact www.carbontrust.co.uk or get in contact with us today for further information about enhance capital allowances and how we can help with your application.

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